How to manage your finances if you have lost your job2 min read . Updated: 26 Jun 2021, 12:03 PM IST
- Job loss is a nightmare. In a challenging phase such as this, it’s imperative to start working on a plan that minimises financial stress
MUMBAI: Losing your job is a nightmare. It may seem diffcult to recover from such a bizarre occurrence. In a challenging phase such as this, it’s imperative that you pick yourself up, dust yourself off and start working on a plan that minimises your financial stress. This process will lend some stability to your life and free up mental space to figure out solutions that can work for you.
Here are some practical steps you could consider maintaining financial stability while you are between jobs.
Review your budget
It is crucial that you have your expenses under control during these times. Design a strict budget and categorise all expenses either as necessities or nice-to-haves. While expenses such as groceries, rent, utilities, etc., will be a priority; you may want to re-evaluate the need for having multiple streaming services or buying new technological gadgets for now.
Prateek Mehta, co-founder and chief business officer, Scripbox said, “While reviewing your budget, have an honest chat with the family. Make them your allies in managing expenses. This process would help you cut down on non-discretionary expenditure. Further this way, you can better allocate your resources to maintain liquidity and improve savings."
Use your emergency savings
Building a contingency fund is pertinent to a sound financial plan. If you have been diligently putting money aside into your emergency savings, this is the time to utilise it.
“About 10-15% of your corpus can be in the form of cash-in-bank, while the rest can be tucked away or converted to a liquid fund. This planning will further help in generating some returns and can be accessed easily when required. Avoid investing in equity for short-term gains, as the risk involved is high. An ideal emergency fund should cover you for 6-12 months of expenses," said Mehta.
Refrain from dipping into your investments
Even though times may be challenging, you should avoid dipping into your investments unless the situation is dire. Remember, it takes a long time to build savings and barely any to deplete it all. Liquidating investments can have a significant impact on your long-term goals such as saving for your children’s education or your retirement planning.
If possible, see if you can tide through with your spouse or any other family member taking on the financial reins for the time being. Alternatively, if you are due to receive a severance package, a small portion could be used for managing expenses, while the rest can go towards your emergency fund.
Tread carefully before borrowing
Remember that any new loan you take could have high-interest rates, eating into your savings and adding to the repayment stress. Prioritise critical existing loans such as a mortgage or car loan. Subsequently, consider paying off other high-interest debt or alternatively refinance them under a single loan.
In addition, use credit cards sparingly. Utilise the interest-free credit window and ensure that you settle the amount due in full and on time. Unpaid credit card dues can snowball quickly and further deplete your credit scores. They are often between 36-45% rates of interest.
Explore the gig economy
“Utilise your free time productively by seeking a supplementary source of income. If you have specific skill-sets, you could look for freelance gigs, part-time consulting opportunities or even monetising your expertise by creating online resources via blogs and videos. In today’s digital world, it is also the best way to be seen and heard," said Mehta
“However minuscule, having a fresh source of income will not only help offset some expenses, but it will also be great for your mental health and self-esteem," he added.
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